My phone buzz, I glanced down as has become customary and ingrained with a micro-shot of dopamine.
Reading the message, it was clearly a worried message from my brother wondering if Abundance Investment’s recent capital raise was a sign the company was in trouble. He sounded panicked and unsure of what to do. I decided I’d have a quick look and it seemed like a good news story – money needed for expansion, quickly filling up and otherwise business as usual. He calmed down but it made me wonder if I should put my money in too?
Putting your money to good use
I’ve written previously about a company called Greencoat Wind that has large windfarms. I’ve invested previously and the way that money flows: My money goes to the company which creates new shares so I own a part of the business. That money is mixed with bank loans/debt as a slush fund to buy windfarms (or equity stakes) as part of the portfolio. The sellers can then use the money themselves to reinvest in new projects. In that way, I get a low risk return with nice dividend and my money ultimately goes to help the green revolution.
Well, Abundance Investment is a little like that but more direct. Your money goes straight to the project. But this capital raise gives you a stake in Abundance the middleman for these projects. Sounds ok to pick up a 2% management fee for your work eh? Nice little earner maybe but what’s the company worth? They’ve raised over £100m towards projects which is no mean feat and they have a strong pipeline to the future. There is no shortage of money making ideas in the coming green revolution and Abundance along with companies like Octopus Energy and even oil-age behemoth’s like Shell are all aiming towards the same goal which is to make money from ultimately reducing our net carbon emissions.
For practical ideas on how to put your money to good (and green) use, the ever readable blog from DIY Investor UK who has transformed his portfolio (and done well for himself at the same time).
How to value a company?
I am not an expert in valuing anything as complex as a company – the combined effort of hundreds or thousands of people, combined with the technology, processes, reputation and products that the company has, the market they work in, are growing in, dying in, competitors & existential threats and risks, future profitability and longevity. Whoever thinks that they can easily do any of this is prone to either over simplification, naivety or bluster – it’s not easy which is why stock prices move week by week, day by day and second by second.
Nobody knows but everyone is trying to make their best guess. It comes down to risk and reward and I’m no expert on adding up the risk.
It’s with this in mind that I approach the pitch from Abundance Investment on the seed capital raising platform Seedrs. Since, they have ambitions to grow (who doesn’t) and were looking to raise £350,000 – which they succeeded to in less than 24 hours! Impressive stuff and with the average investment being £1500 per person (more or less), it’s not big fat cat investors that are getting involved but people like you and me. My own view of sites like Seedrs is that the time it would take to separate the wheat from the chaff and the diamond in the rough from the scams (of which there must be) makes it unattractive to me. Maybe returns are good but if I include an hour wage for due diligence, it’s a poor/negative return. If you like this sort of thing then it might be fun – like playing Fantasy Football. Fantasy Footsie you could call it if you like a good pun.
I’ve been investing with Abundance Investment for about 6 years and they appear to have a very clear business model – investing in green projects or projects that are sustainable. It’s easy to understand how a solar panel or windmill makes money and it’s an area that I’ve interest in and skin in the game elsewhere (written about here), so I’m comfortable with it. Would I invest in Abundance to become an equity holder? I’m not sure for a number of reasons:
Even investments that turn out great like my investment in Beer Co. can go flat when your shares are untradeable and the is always promising to list this time next year… Abundance might be a great investment, but I would rather have money now – especially since I’d be investing non-retirement funds, funds I might need at some point. Exit strategy is a risk for me, I don’t want too much capital tied up for years.
Things going full Funding Circle
Abundance may go out of business or suffer declines in the share price. Look at Funding Circle as well as many other P2P lenders. The business may continue to be a success and they keep producing new projects and raising more money for them but the sliver of money between what they have coming in and what they have going out means that the company is treading water and investors lose out.
I tend to not be a good picker of stocks and this might be true yet again. I’ve also not used Seedrs before.
I have tried to stay away from investing in individual companies. If I invested in this, I’d start getting or even reading the emails from Seedrs and start dipping my toe in again.
Get Rich Once
How much would I realistically invest in Abudnance? £10k – that’s probably too much. £1k? In which case that’s just about around 0.1% of my net worth. Is it worth it? Even if the company soars in value by a factor of 10, it’s still small beer.
The capital raise has gone really well for Abundance so far, so arguably they don’t need my money. I also don’t particularly need to be complicating things myself at this time. I can continue to support Abundance by investing in their projects which give a clearer rate of return in the region of what I’m satisfied with. By all means have a look yourself (Seedrs site here).
To sum it all up, it’s a Duncan Bannatyne from me – “I’m oot”
(Just to add that I don’t hold any shares in any company mentioned here and I’ve not used Seedrs before. I do hold some shares in Octopus Renewables as well as Octopus VCT which are not part of the Octopus Energy company)